Debtors and the use of power

This article on rediff is very instructive on the Chinese potential to create havoc in the American financial system. I have said before that China could buy up banks / shadow banking system in the US and use it as a bull-whip

Steve Coll has an interesting analogy - America is where the British were after second world war - http://www.newyorker.com/online/blogs/stevecoll/2008/10/the-debtors-dil.html - perhaps even worse (the Brits relied on Americans - the Americans have to rely on Chinese)

as they say- he that pays the piper calls the tune


I doubt if the Chinese will do it right away though - had their growth been more balanced due to domestic demand they may well have dared, but right now is not a good time. The RBI should stop supporting the dollar and let the rupee strengthen - and stop holding too much dollar reserve. The dollar will plunge one day